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Network World - The wave started last year when Time Warner Cable, the telecommunications company serving much of the Eastern United States, spent $230 million to purchase NaviSite, a provider of cloud services for businesses.
Two months later, in April, CenturyLink, the southern telecom, bought Qwest for $12.2 billion worth of stock. That same month, Verizon responded by purchasing Terremark, the cloud infrastructure-as-a-service provider. CenturyLink followed by purchasing Savvis, another IaaS provider, for $2.5 billion.
It's been a busy past 18 months for domestic telecommunication companies that have aggressively entered the increasingly crowded cloud marketplace. But what's the core strategy for these telecoms? And do they really have a chance of competing against industry leaders?
"[The telecoms'] core business is changing around them, and the cloud is a very natural place for them to go," says Chris Drumgoole, senior vice president of client services for IaaS company Terremark, which is now owned by Verizon.
As telecoms iron out their cloud strategy, experts say they need to move quickly. Revenues from their traditional voice offerings are eroding and competitors are moving quickly to diversify their offerings and attract new customers. Amazon Web Service, Microsoft Azure and Google have all reduced prices on their cloud offerings in the past month, for example.
Telecoms do offer some advantages -- namely, they already have a large nationwide network infrastructure. But some experts believe telecoms don't have a chance to compete against market leaders such as AWS, IBM and HP, and that telecoms instead need to focus on new value-add services they can provide.
"This is a very new direction for the carriers who have in the past played it close to the vest," says Bob Rosenberg, an independent analyst who has been tracking telecommunications companies since 1990.
The carriers are "gobbling up data centers," he says, which in a sense amounts to a game of catch-up. IaaS competitors already own massive IT infrastructures that telecoms are now trying to build up themselves. But there is one area where telecoms have an edge: "They have the wires," Rosenberg says.
Armed with their newly acquired data centers, Rosenberg says the natural move is to play up the security and network infrastructure strengths their legacy wired networks inherently bring. From an end user perspective, that appeals to customers looking for low-latency connections for large amounts of data transfer.
"As providers of infrastructure services, we have to be able to improve the value proposition for customers," says Bryan Doerr, CTO at Savvis. "Telecoms help us do that. We can leverage the scale, capital efficiencies and combine them with our expertise." One significant differentiator he sees as now being part of CenturyLink, he says, is security. "It's about more than just hosting now; it's about having a network that can connect these enterprises, which is a big part of the security story," he says.